India’s biggest maker of the machines has begun talks with
lenders for a two-year moratorium on interest and principal
repayments, the company said in an e-mailed statement late
yesterday.

Suzlon, which has posted losses for three years, also
suspended guidance for the current fiscal year due to liquidity
constraints, volatile market conditions and problems financing
its debt.

The company is negotiating separately with bondholders and
expects “an acceptable solution will be reached at the earliest
possible date,” Chief Financial Officer Kirti Vagadia said in
the statement.

Suzlon is struggling to pay down debt it racked up in
overseas acquisitions before a global supply glut slashed
turbine prices by 23 percent from their peak in 2009, data
compiled by Bloomberg show. On Oct. 11, it defaulted on $209
million of convertible notes after bondholders rejected its
request for a four-month extension.

State Bank

In an effort to unlock cash for the company, lenders led by
State Bank of India are seeking to acquire loans made to
Suzlon’s German unit Repower Systems SE, said three people with
knowledge of the matter.

The Hamburg-based unit of Suzlon raised a 725-million euro
letter of guarantee and a 25-million euro credit facility from
lenders including BayernLB Holdings AG and Commerzbank AG in
February.

Terms of that loan prohibit Suzlon from tapping Repower’s
cash or drawing on credit available to the unit, two of the
people said asking not to be identified because the information
is private. The SBI-led group plans to change those terms after
acquiring the loan, the people said.

Suzlon and Repower declined to provide the unit’s stand-alone cash balance or debt. A spokesman at SBI did not reply to
an e-mail seeking comment.

Balance Sheet

Repower’s cash balance was about $163 million, said Antoine
Bourgault, a London-based analyst at ISM Capital LLP, citing
figures provided by Suzlon for the quarter ending June 30. The
German unit also has $163 million of debt, “which may or may
not have to be redeemed,” Bourgault said.

In 2010, Suzlon refinanced 100 billion rupees of debt
accumulated from buying stakes in Repower and Belgium-based
gearbox maker Hansen Transmissions. Principal repayments started
on those loans after a two-year grace period ended in April.
Maturity for the loans was scheduled for 2017. The restructuring
plan would push repayment back to March 2023.

Shares Decline

Suzlon shares have declined 59 percent in the past year,
according to data compiled by Bloomberg. A lack of working
capital constrained its ability to complete orders in the
quarter that ended June 30, Vagadia said in August after the
company reported its second-biggest quarterly loss since at
least 2007.

The company is also asking lenders for an injection of
working capital and an interest rate reduction as part of its
corporate debt restructuring proposal, according to Vagadia.

India’s Corporate Debt Restructuring Mechanism allows
viable companies additional time to meet debt obligations.
Suzlon’s lenders have 90 days to approve or make changes to the
proposal with the possibility of a 180-day extension, according
to the program’s rules. If the proposal is rejected as
unfeasible, “lenders may start action for recovery of their
dues,” according to the program’s website.